Producer price index/ November inflation report/ US wholesale costs/ Federal Reserve rate cuts/ core inflation trends/ WASHINGTON/ Newslooks/ J. Mansour/ Morning Edition/ The U.S. producer price index rose 0.4% in November, indicating that inflationary pressures persist despite significant declines from peak levels. Higher food prices fueled the increase, with year-over-year wholesale inflation climbing to 3%, the highest since February 2023. The Federal Reserve is still expected to cut interest rates next week as inflation moderates.
November Wholesale Inflation Quick Looks
- Monthly Increase: Producer prices rose 0.4% in November, up from October’s 0.3%.
- Year-Over-Year: Wholesale inflation climbed 3%, the sharpest annual increase since February 2023.
- Core Prices: Excluding food and energy, core producer prices rose 0.2% month-to-month and 3.4% year-over-year.
- Consumer Inflation Connection: November consumer prices rose 2.7%, driven by used cars, hotel rooms, and groceries.
- Federal Reserve Outlook: Despite inflation upticks, the Fed is expected to issue its third consecutive rate cut.
US Wholesale Costs Up 3% in November: Inflation Concerns Remain
Deep Look
Wholesale Inflation Snapshot
Wholesale inflation in the United States accelerated in November, with the producer price index (PPI) increasing by 0.4% from October, according to the Labor Department’s report released Thursday. This rise was slightly above economists’ expectations and marks the sharpest annual increase in wholesale prices—3%—since February 2023.
The monthly PPI uptick was fueled primarily by higher food prices, reflecting persistent price pressures in certain sectors of the economy. Excluding volatile categories like food and energy, core producer prices rose 0.2% month-to-month and 3.4% year-over-year.
Broader Inflation Context
The wholesale price data aligns with Wednesday’s report on consumer inflation, which showed a 2.7% annual rise in prices paid by consumers, up from October’s 2.6%. Elevated prices for used cars, hotel rooms, and groceries contributed to the increase.
While inflation has fallen significantly from its 9.1% peak in June 2022—a 40-year high—it remains above the Federal Reserve’s 2% target.
Federal Reserve Policy Outlook
Despite November’s inflation upticks, the Federal Reserve is expected to cut its benchmark interest rate next week, marking the third consecutive reduction. The Fed’s aggressive rate hikes in 2022 and 2023, which raised its key rate 11 times to a two-decade high, aimed to combat the post-pandemic inflation surge.
However, steady inflation cooling since September has allowed the Fed to shift its approach. Policymakers view November’s wholesale price data as an early indicator of consumer inflation trends, helping to guide their decisions.
Why PPI Matters
Economists closely watch the PPI for insights into future consumer inflation. Components like healthcare and financial services in the PPI feed into the Fed’s preferred inflation measure, the Personal Consumption Expenditures (PCE) index. The November PPI report suggests some areas of inflation may persist even as the overall trend points toward moderation.
Economic Implications
While the November PPI data reflects lingering inflationary pressures, it also highlights the broader resilience of the U.S. economy. Businesses and consumers continue to navigate price fluctuations, with both short-term spikes and long-term cooling shaping the economic landscape.
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